DailyTrends.com Small Cap Pick of the Week: Commonwealth Bio (CBTE)
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Terrorism happens to be a big concern with everyone in this country, especially bio-terrorism.
Now that Bush has been re-elected again, it will no doubt serve as a focal point in the United States.
The government has a budget for BIO-terrorism research and protection of close to $18 billion in 2005. That number only indicates how much emphasis the Bush Administration is placing on making sure no one makes a "dirty" or radioactive bomb.
There is one small company that has managed to benefit from this surge in spending beautifully.
It's called Commonwealth Biotech (CBTE), and they are based near Washington DC.
Now Commonwealth isn't one of these "spur of the moment" companies that just comes public to benefit of "homeland defense".
CBTE was founded back in 1992, and has since its inception provided research and development services to over 2,800 companies.
This includes companies in the private sector (big pharma), academic institutions, and government agencies all around the world.
Commonwealth operates on both short- and long-term contracts. Services include DNA sequencing; peptide and protein sequencing; and monoclonal antibody production. The company also performs genetic identity and paternity testing.
This is all good and dandy (these guys have a very high customer retention rate).
However, the thing that excites me most as an investor is another key area of operation that most people don't even know CBTE to be an expert in.
You guessed it! CBTE also has a role in bio-defense.
Over the past year, CBI has received a few contracts with the federal government to provide bio-agent DNA sequencing and other research to identify and neutralize biologic threats.
Back in May, the company closed a financing deal worth $2.5 million dollars. Each share was priced at $6.25. The money was essentially used to upgrade its bio-defense capabilities by expanding their laboratory.
A very good decision in my eyes, because management wanted to become more competitive in bidding for some of the larger bio-terror contracts.
They have signed several million dollar deals since then, and are looking for more.
Just this Monday, CBI reported record revenues and profitability through the third quarter. It was also the fifth consecutive quarter of profitability. The thing that excited me the most was the company signed new contracts for bio-defense and clinical lab support research and development projects totaling approximately $4.7 million, bringing the year-to-date total to over $8 million.
Here are some excerpts from the third quarter:
"Perhaps the most significant aspect of the Company's improving financial condition is that the momentum of revenues recognized during the last two months of the third quarter is being carried into the fourth quarter and beyond. While the Company is primarily engaged in government contracts, revenues are also increasing from private sector clients, mainly in the area of laboratory support services for clinical trial work. One of these latter contracts began in September, while a second of these contracts is now slated to start in December, due to a two months delay in the patient enrollment process. Further, management notes that the launch of its initiative with Fisher Scientific, LLC, took place in early October, after the close of the third quarter, making revenues generated from this alliance realizable no sooner than the fourth quarter."
The President stated "Our mission is to be the most comprehensive contract research organization in the market, providing complete research and development services to the biotechnology industry, pharmaceutical companies, government agencies and academic institutions. Our actions and achievements during this year have brought us closer to realizing these goals. With over $8 million in new contracts, the Fisher Scientific agreement, the IITRI re-award, and the NCI award, we look forward to strong revenue growth in the fourth quarter."
In conclusion, I think this stock is a great addition to one's portfolio for these simple reasons:
- 31% of CBI is owned by insiders
- It only has 2.2 million in the float
- Over $3.5 million in NET TANGIBLES
- BACKLOG of $8,000,000 and consistently growing
Commonwealth Bio is a very SOLID micro-cap company in my opinion, which will continue to grow heading into 2005.
Check it out.
Chris Lahiji will be available to take your questions until Thursday, November 1. Please use the form below to submit your questions.